Glenview Capital’s Alternative Slate of Directors for HMA Could Take Two Weeks or Three Months

As expected, Health Management Associates Inc (NYSE:HMA)’s largest shareholder, Glenview Capital, launched a campaign to replace the company’s board with its own slate of 8 nominees. This sets up a shareholder vote – which many expect would be completed (one way or the other) in the next several months at most. In a letter/slide presentation (embedded below) to shareholders criticizing the oversight of the current board and management, Glenview says it has not predetermined whether sale of the company or new management is best for shareholders and wants a new board to decide. Glenview’s slate of nominated directors includes Kirk Gorman, formerly CFO of Universal Health Services, Inc. (NYSE:UHS) and now CFO of Jefferson Health System in Philadelphia.

Glenview Proposed Nominees All Independent

The proposed nominees do not include any Glenview employees focusing instead on industry executives such as a former Universal Health Services, Inc. (NYSE:UHS) CFO, a former ManorCare COO, a former HHS Deputy General Counsel, a former Health Management Associates Inc (NYSE:HMA) COO, a former LabOne CEO, a former Health Care investment banker and a former Magellan CEO.

In the open letter, Glenview stated that they do not know whether selling the company is the best option and noted they have never asked Health Management Associates Inc (NYSE:HMA) to definitively sell themselves to the highest bidder, nor have they recommended that HMA ignores such possibilities. Rather, they suggest the company explore all options. While HMA retained an advisor to evaluate its strategic options, Glenview believes there needs to be first a change at the management level before an unbiased process can be performed.

Health Management Associates Inc (NYSE:HMA) shares have already risen nearly 40% in recent weeks amid published speculation it could be a potential takeover target (with CYH reportedly a likely suitor, according to Bloomberg, for example). Glenview says that a new board should conduct a strategic review.

Gary Taylor of Citigroup Inc (NYSE:C) uses the following math for the timeline:

Apparently the SEC must approve the consent solicitation and this process typically takes 10-20 days. Once approved, the 60-day solicitation window becomes effective. As soon as 50.1% of outstanding shareholders tender their written consent, HMA’s current board could be replaced within 48 hours. The fastest plausible timeline would therefore be SEC approval by ~ July 5th, majority consents received within a day or two (say 7/8 given the Holiday), then 48 hour period (7/10) for the new board to become effective. Alternatively, the SEC could take 20 days to approve (~7/15), it could take the full 60 days (unlikely in our opinion) to achieve majority consent (~9/13). Of course the SEC could fail to approve the consent solicitation and it is possible that the solicitation will not achieve the required majority support.

Citigroup states

We now believe that resolution of the alternative slate of directors could occur as quickly as the next two weeks to as long as 80 days.”

Justin Lake of JPMorgan Chase & Co. (NYSE:JPM) has similar different math, he states:

Glenview is making a preliminary filing with the SEC to start the process for a vote on removing and replacing the board. It is expected to take 10-20 days to finalize the documentation with the SEC, at which point a 60-day clock starts for voting. If Glenview receives support of 50.1% of shareholders for its slate (it already owns 14.6%), the new board sits – no special meeting is necessary.

Meanwhile, shareholders (including Glenview) will be anxiously awaiting what could be a very long summer.